Category: Economics

“The Future Is Rich in Opportunity”

(p. A13) Ken Langone, 82, investor, philanthropist and founder of Home Depot, has written an autobiography that actually conveys the excitement of business–of starting an enterprise that creates a job that creates a family, of the joy of the deal and the place of imagination in the making of a career. Its hokey and ebullient name is “I Love Capitalism” which I think makes his stand clear.
. . .
Can capitalism win the future? “Yes, but we have to be more emphatic and forthright about what it is and its benefits. A rising tide does lift boats.”
Home Depot has changed lives. “We have 400,000 people who work there, and we’ve never once paid anybody minimum wage.” Three thousand employees “came to work for us fresh out of high school, didn’t go to college, pushing carts in the parking lot. All 3,000 are multimillionaires. Salary, stock, a stock savings plan.”
Mr. Langone came up in the middle of the 20th century–the golden age of American capitalism. Does his example still pertain to the 21st? Yes, he says emphatically: “The future is rich in opportunity.” To see it, look for it. For instance: “Look, people are living longer. They’re living more vibrant lives, more productive. This is an opportunity to accommodate the needs of older people. Better products, cheaper prices–help them get what they need!”
Mr. Langone grew up in blue-collar Long Island, N.Y. Neither parent finished high school. His father was a plumber who was poor at business; his mother worked in the school cafeteria. They lived paycheck to paycheck. He was a lousy student but he had one big thing going for him: “I loved making money.” He got his first job at 11 and often worked two at a time–paperboy, butcher-shop boy, caddie, lawn work, Bohack grocery clerk. He didn’t mind: “I wanted to be rich.”

For the full commentary, see:
Peggy Noonan. “DECLARATIONS; Wisdom of a Non-Idiot Billionaire.” The Wall Street Journal (Saturday, May 12, 2018): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date May 10, 2018.)

The book mentioned in the commentary, is:
Langone, Ken. I Love Capitalism!: An American Story. New York: Portfolio, 2018.

Blockchain May Enable “Consent-Based Ad Models”

(p. A13) Internet advertising started simply, but over time organically evolved a mess of middle players and congealed into a surveillance economy. Today, between end users, publishers and advertisers stand a throng of agencies, trading desks, demand side platforms, network exchanges and yield optimizers. Intermediaries track users in an attempt to improve revenue.
It’s an inevitable consequence of such a system that users end up treated as a resource to be exploited. When you visit the celebrity website TMZ, for instance, you face as many as 124 trackers, according to a Crownpeak test. Your data is stored and profiled to retarget promotions that shadow you around the Internet. You become the product. Some claim your data is not “sold,” but access is certainly rented out.
. . .
For a solution, look to blockchain technology. More than a word peppering earnings calls, it can deliver the change brands, publishers and users need. Put simply, it’s an immutable database that records transactions and produces trustworthy data.
In advertising, blockchain’s reliable data can radically shrink the ad-tech blob and provide the foundation for consent-based ad models. Improved blockchain reporting and transparency would obviate much of the need for companies focused on measurement, verification and even some data suppliers. Companies like Brave are using blockchain to build software that allows for more-direct relationships between advertisers and publishers, as it was before the blob. (Earlier this month Brave announced a partnership with Dow Jones Media Group, a division of this newspaper’s parent company.) Anonymous data on the blockchain or on a device can even replace the need for the mining of individual user data. Users should be compensated for their attention and seen as customers again.
The internet need not be characterized by predation and parasitism. It can once again be a place of infinite possibility. Innovation got us into this situation; it can get us out.

For the full commentary, see:
Brendan Eichand and Brian Brown. “The Internet’s ‘Original Sin’ Endangers More Than Privacy.” The Wall Street Journal (Saturday, April 28, 2018): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date April 27, 2018.)

Lack of “Air-Conditioning Can Be Deadly”

(p. A10) The number of air-conditioners worldwide is predicted to soar from 1.6 billion units today to 5.6 billion units by midcentury, according to a report issued Tuesday by the International Energy Agency.
. . .
While 90 percent of American households have air-conditioning, “When we look in fact at the hot countries in the world, in Africa, Asia, Latin America and the Middle East, where about 2.8 billion people live, only about 8 percent of the population owns an air-conditioner,” said Fatih Birol, executive director of the energy agency.
As incomes in those countries rise, however, more people are installing air-conditioners in their homes. The energy agency predicts much of the growth in air-conditioning will occur in India, China and Indonesia.
Some of the spread is simply being driven by a desire for comfort in parts of the world that have always been hot.
. . .
And when it gets hot, forgoing air-conditioning can be deadly. The heat wave that plagued Chicago in 1995 killed more than 700 people, while the 2003 European heat wave and 2010 Russian heat wave killed tens of thousands each.

For the full story, see:
Kendra Pierre-Louis. “World Tries to Stay Cool, but It Could Warm Earth.” The New York Times (Friday, May 18, 2018): A10.
(Note: ellipses added.)
(Note: the online version of the story has the date May 15, 2018, and has the title “The World Wants Air-Conditioning. That Could Warm the World.”)

Jeff Bezos Is “Exploring Strange New Worlds”

(p. A15) Jeff Bezos is the world’s richest person. Amazon is on a tear–sales grew 43% last quarter–and may soon pass Apple as the world’s most valuable company. Amazon has ruptured retail, floated in the cloud, and even made superhero TV shows like “The Tick.” But what makes Mr. Bezos tick?
. . .
. . . , Mr. Bezos is now channeling pioneers, be they Columbus or James T. Kirk, exploring strange new worlds. His strategy is that he doesn’t let business models get in his way while exploring on the edge.
. . .
I’m convinced the real secret to Mr. Bezos’s success is that he hates PowerPoint slides. He insists instead on six-page narratives at meetings. Stories codify exploration. Here’s one: Put Alexa in every doctor’s office to listen and correctly fill in medical records automatically from the transcripts, freeing doctors to actually care for patients! Business model to come (but pretty obvious).

For the full commentary, see:
Andy Kessler. ” INSIDE VIEW; Columbus Discovers the Amazon.” The Wall Street Journal (Monday, May 7, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 6, 2018.)

“Politicians Use Economics the Way a Drunk Uses a Lamppost”

(p. A13) Mr. Blinder cites what he calls the Lamppost Theory: “Politicians use economics the way a drunk uses a lamppost–for support, not for illumination.”

For the full review, see:
Matthew Rees. “BOOKSHELF; What They Don’t Teach in Econ 101.” The Wall Street Journal (Wednesday, April 17, 2018): A13.
(Note: italics in original.)
(Note: the online version of the review has the date April 18, 2018, and has the title “BOOKSHELF; ‘Advice and Dissent’ Review: What They Don’t Teach in Econ 101.”)

The book under review, is:
Blinder, Alan S. Advice and Dissent: Why America Suffers When Economics and Politics Collide. New York: Basic Books, 2018.

Paying Consumers for Their Data

(p. B4) WASHINGTON–For every link you click, every photo you post, every word you search, somebody markets the data to advertisers seeking to target you. Consumer data is a valuable commodity, and that is one reason Google, Facebook and others let you use their platforms at no cost.
An Australian app maker called Unlockd thinks it has a better idea: The consumer should get a cut of this mobile-data business, in the form of rewards or other incentives. Other newcomers and smaller firms are taking a similar tack. Should this approach take off, some see it becoming a viable alternative to the ad model driving big platforms like Alphabet Inc.’s Google.

For the full story, see:
McKinnon, John D. “Startup Wants to Reward Your Clicking.” The Wall Street Journal (Thursday, May 10, 2018): B4.

(Note: the online version of the story has the date May 9, 2018, and has the title “Startup Takes on Google With a New Approach: Rewards for Users.”)

China’s “Double Whammy for Prospective Entrepreneurs”

(p. B12) China’s past attempts to stoke indigenous innovation have a checkered history. A flood of cheap capital and high, state-set solar power rates in the mid-2000s secured China’s place as the world’s number one solar cell manufacturer. But it also led to enormous overcapacity, which sank prices and pushed debt burdens higher, making investment in real R&D more difficult. For investors, China’s solar champions have been a losing proposition–American depositary receipts of top firms such as JinkoSolar are worth less than half of their peak in 2010. Robotics, a key element of Beijing’s “Made in China 2025” plan to dominate high-tech manufacturing, is exhibiting similar tendencies.
The state-centric nature of China’s financial system–and its weak intellectual property protection–represents a double whammy for prospective entrepreneurs. Small private-sector firms often only have access to capital through expensive shadow banking channels, and face the risk that some better connected, state-backed firm will make off with their designs–with very little recourse.

For the full story, see:
Nour Malas and Paul Overberg. “‘Chinese Innovation Won’t Come Easily Without U.S. Tech.” The Wall Street Journal (Tuesday, March 23, 2018): B12.
(Note: the online version of the story has the date March 22, 2018, and has the title “Can China’s Red Capital Really Innovate?”)

San Francisco Suffers Net Loss of People as Tech Booms

(p. A3) San Francisco is such a boomtown that people are leaving in droves.
In 2016 and 2017, more people moved out of the San Francisco-Oakland-Hayward metropolitan area–an urban core of 4.7 million people in a broader region known as the Bay Area–than moved into it from other parts of California or the U.S., according to U.S. census data.
In the year that ended July 1, the region showed a net loss of nearly 24,000 residents to the rest of the country, roughly double the loss of the previous year and a sharp reversal from net annual gains of about 15,000 as recently as 2013-14.
Economists said the outflow is being driven by the high cost of housing in the area, where the average home value in several counties surpasses $1 million.

For the full story, see:
Nour Malas and Paul Overberg. “‘San Francisco’s Boom Leads to an Exodus.” The Wall Street Journal (Friday, March 23, 2018): A3.
(Note: the online version of the story has the date March 22, 2018, and has the title “San Francisco Has a People Problem.”)

More Firms Educate In-House

(p. B5) . . . Atlanta-based aluminum-products maker Novelis started a school within the company to impart lessons pulled from the factory floor with a faculty and nine “deans” to oversee it.
Federal policy for decades has pushed more people to go to four-year colleges, promoting a college-preparatory high-school curriculum and easing access to student loans. But technology is changing faster than colleges can keep up and employers say too many schools aren’t teaching students the skills they need–or even basic critical thinking.
With the labor market the tightest it has been in a generation, this misalignment is causing big–and expensive–headaches for employers. So companies are increasingly taking matters into their own hands. Major employers like CVS Health Corp., Novelis, International Business Machines Corp., Aon PLC and JPMorgan Chase & Co. are hiring workers because of what they can do, or what the company believes they can teach them, instead of the degrees they hold.

For the full story, see:
Douglas Belkin. “‘Education Is Moving to the Factory Floor.” The Wall Street Journal (Friday, March 23, 2018): B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 22, 2018.)

California Regulation Adds $9,500 to Average Home Cost

(p. A1) The California Energy Commission voted 5-0 to approve a mandate that residential buildings up to three stories high, including single-family homes and condos, be built with solar installations starting in 2020.
The commission estimates that the move, along with other (p. A2) energy-efficiency requirements, would add $9,500 to the average cost of building a home in California. The state is already one of the most expensive housing markets in the country, with a median price of nearly $565,000 for a single-family home, according to the California Association of Realtors.

For the full story, see:
Erin Ailworth. “Solar Panel Mandate Jolts Housing Industry.” The Wall Street Journal (Thursday, May 10, 2018): A1-A2.

(Note: the online version of the story was updated May 9, 2018, and has the title “California Takes Big Step to Require Solar on New Homes.”)

Hundreds of Years of CO2 Emissions Could Be Stored Forever in Oman’s Rocks

(p. A10) IBRA, Oman — In the arid vastness of this corner of the Arabian Peninsula, out where goats and the occasional camel roam, rocks form the backdrop practically every way you look.
But the stark outcrops and craggy ridges are more than just scenery. Some of these rocks are hard at work, naturally reacting with carbon dioxide from the atmosphere and turning it into stone.
Veins of white carbonate minerals run through slabs of dark rock like fat marbling a steak. Carbonate surrounds pebbles and cobbles, turning ordinary gravel into natural mosaics.
Even pooled spring water that has bubbled up through the rocks reacts with CO2 to produce an ice-like crust of carbonate that, if broken, re-forms within days.
Scientists say that if this natural process, called carbon mineralization, could be harnessed, accelerated and applied inexpensively on a huge scale — admittedly some very big “ifs” — it could help fight climate change. Rocks could remove some of the billions of tons of heat-trapping carbon dioxide that humans have pumped into the air since the beginning of the Industrial Age.
And by turning that CO2 into stone, the rocks in Oman — or in a number of other places around the world that have similar geological formations — would ensure that the gas stayed out of the atmosphere forever.
“Solid carbonate minerals aren’t going anyplace,” said Peter B. Kelemen, a geologist at Columbia University’s Lamont-Doherty Earth Observatory who has been studying the rocks here for more than two decades.
Capturing and storing carbon dioxide is drawing increased interest. The Intergovernmental Panel on Climate Change says that deploying such technology is essential to efforts to rein in global warming.
. . .
The rocks are so extensive, Dr. Kelemen said, that if it was somehow possible to fully use them they could store hundreds of years of CO2 emissions. More realistically, he said, Oman could store at least a billion tons of CO2 annually. (Current yearly worldwide emissions are close to 40 billion tons.)

For the full story, see:

Henry Fountain. “How Oman’s Rocks Could Help Save the Planet.” The New York Times (Saturday, APRIL 28, 2018: A10-A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date APRIL 26, 2018.)